Report: Economics may doom Limerick nuker

LIMERICK — Have the economics of nuclear power doomed the Limerick nuclear plant to early closure?

Mark Cooper, senior fellow for economic analysis at Vermont Law School’s Institute for Energy and the Environment, thinks that may be the case.

According to a 50-page report Cooper released this month, the combination of competition from renewable wind and solar sources — along with abundant natural gas — combined with the increased cost of operating and upgrading aging nuclear plants in the post-Fukushima environment may soon make the continued operation of nuclear plants (and the construction of new ones) simply unprofitable.

In a ranking matrix Cooper constructed from three reports by Wall Street analysts, Limerick is among 38 reactors in 23 states that exhibit four or more of the 11 risk factors he has identified for early closure.

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The Wall Street analyses on which Cooper’s report is based were undertaken by Moody’s, UBS and Credit Suisse.

However, although the Limerick plant may have risk factors, it is not on Cooper’s list of the 12 reactors “found to be at greatest risk of early retirement.”

In fact, although Three-Mile Island and Susquehanna nuclear plants are also listed among the 38 reactors with four or more risk factors, no Pennsylvania nuclear plants are among the 12 Cooper considers most at risk or early retirement.

• “In the near term, old reactors are uneconomic because lower-cost alternatives have squeezed their cash margins to the point where they no longer cover the cost of nuclear operation;

• “In the mid term, things get worse because the older the reactors get, the less viable they become;

• “In the long term, new reactors are uneconomic because there are low-carbon alternatives that are less costly and less risk.”

“No U.S. nuclear plant has ever closed because it reached the end of its licensed life,” Peter A. Bradford, a former member of the U.S. Nuclear Regulator Commission and an adjunct professor at Vermont Law School, said in a state that accompanied the report’s release.

“Instead, cost challenges to their continued profitability has usually been the cause of shutdowns,” said Bradford, who is also a former utility commission chairman in New York and Maine. “Dr. Cooper’s new work shows this to be a widespread and enduring problem, one that further undermines nuclear power’s claim to be a promising bulwark in a serious climate policy.”

Dana Melia, communications director for the Limerick Generating Station, responded to a request for a response to the report with the following statement:

“Exelon’s nuclear fleet is a low-cost and extremely competitive set of long-term assets. The company is not considering closing any nuclear plants at this time, except for Oyster Creek, which will continue to operate until 2019. (The closing of Oyster Creek was announced in 2010.)”

In an e-mail, she added: “Exelon continues to invest in its world-class nuclear plants to ensure that they operate safely and efficiently. In fact, Limerick’s license renewal application is strong and on track; we will continue to invest in the plant to ensure we meet customer demand for years to come. With temperatures close to 100 degrees this week, Limerick has been reliably producing enough electricity to power approximately 2 million homes.”

Although Cooper’s report is not full of much good economic news for the Limerick plant, he points out that it is a broad overview meant to give advance warning to policy-makers of what’s coming nationally, so they can prepare for the eventualities his analysis shows.

“The historical analysis shows that it is generally a combination of factors that leads to the retirement decisions,” he wrote. “However, the vulnerability of large numbers of reactors suggests that there will be future early retirements and uprates will be slow to come.”

Also, five large “up-rate” projects, including Limerick’s, were canceled this year.

Exelon had plans to increase output from Limerick and two plants in Illinois by 1.6 percent.

Had the plans moved forward, Exelon intended for Limerick to generate an additional 270 megawatts of power. Currently, the two reactors at the plant generate 2,345 megawatts of electricity, but those plans were scrapped in June.

“While the expectation of the need around hardened vents differ, we see cost risks of up to $30-$40 Mn per unit under a worst-case scenario; while other estimates suggest cost range in the $15 Mn ballpark,” UBS wrote. “Notably, PPL estimates Fukushima-related costs of $50-60 Mn, excluding vents, for its 1.6GW Susquehanna unit.”

Just last month, the NRC announced it would require Limerick, which has a generator design similar to the one damaged in the Fukushima accident, to install the “hardened vent” system UBS mentions to prevent a build up of hydrogen which caused the explosions that destroyed containment structures in Japan.

“I work on the best facts I can find and I invest on the best facts I can find and those facts say gas is queen, whether I love her or not,” is among the Rowe quotes Cooper cites in reference to the impact the low cost of natural gas is having on the electricity market.

“I think wind and solar do become more economic, wind much the first,” Cooper quotes the Exelon chief as saying. “Nuclear plants may become economic again, but not in the next decade.”

It is the next two decades which will be critical to determining whether the predicted “nuclear renaissance” occurs, Cooper argues, concluding that the combination of economic factors will make it likely that not only will new plants not be built, but that existing ones may shut down sooner than expected.

“The presence of markets across the country sends strong signals to regulators that keeping aging reactors on-line, especially if they need repairs or retrofits, does not make economic sense,” Cooper wrote.

Whether its Limerick, or a plant with more risk factors, Cooper warns that “a large number of reactors are poised on the razor’s edge of economic abandonment.”

He concludes that “the chances are high that any one of a number of the key factors — significant repair costs, retrofits to improve safety, stiff competition from lower-cost energy alternatives, rising costs of operation — will push the owners to retire the reactors early for economic reasons.”